What is meant by the term "rate of interest"? If the nominal rate of interest in an economy is 6%, and the rate of inflation in the economy is 4%, what is the real rate of interest in the economy?
What will be an ideal response?
The rate of interest is the additional payment a borrower has to make on a one-dollar loan typically at the end of a year.
The real rate of interest = nominal rate of interest - inflation rate → the real rate of interest = 2%.
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Indicate whether the statement is true or false
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A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
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